An income cap trust is a legal trick that allows people who earn too much to qualify for Medicaid to get Medicaid anyway. The trust solves, somewhat underhandedly, a real problem. A elder needing nursing care cannot have the government pay for that care unless his or her income is less than $2022 per month. Nursing homes charge $6,000 or so a month. We do not, however, abandon our elderly on the side of the road because they earn too much for Medicaid but not enough to pay for a nursing home. The way we take care of these folks is with the income cap trust. It works like this.
An elder who needs long term care makes a Medicaid application. Let’’s say the Medicaid intake worker finds out that the elder has a combined total Social Security and pension income of $3,000. This is more than the $2,022 allowed. The Medicaid worker tells the elder she needs an income cap trust. The elder goes to her Oregon elder law lawyer. The lawyer calls the Medicaid worker to schmooze and then the lawyer then prepares the trust.
Income cap trusts are pretty much standard. You can see an example at the DHS website. The one I use is very similar to that one. A trusted relative usually serves as trustee and opens a bank account in the name of the trust. All of the elders monthly income is put in that account. Once all of the elder’s money has come in for a given month the trustee distributes it according to a schedule at the back of the trust. Because printing out the trust itself with the names changed from the last client is mostly a no-brainer, the work for the lawyer is working out the schedules.
The short version of the schedules is that the elder gets a few bucks, a few bucks may go to health insurance or taxes, and the rest of the elder’s income goes to the care center. The government then pays the difference between what the elder can pay and what the care acutally costs. This way no elders get parked on the street without care, and the government is sure that the elder is paying as much as he can.
It used to be the case the the trust allowed a distribution from the trust to pay the lawyer who made it. That is no longer the case. If an elder has income that is over the Medicaid limit of $2,022 she needs to budget some money for the lawyer. An elder must have less than $2,000 in available money or property before he will be eligible for Medicaid. A good way to get below this limit is to pay the lawyer for the work that will need to be done on the income cap trust.
Some income cap trusts are simple and get approved easily. Others, particularly when the elder going into care is married, can be fairly complicated. The key for the lawyer is having frequent and friendly contact with the Medicaid worker handling the case.